Exam 6: Variable Costing and Performance Reporting

A company normally sells a product for $25 per unit.Variable per unit costs for this product are: $3 direct materials, $5 direct labor, and $2 variable overhead.The company is currently operating at 100% of capacity producing 30,000 units per year.Total fixed costs are $75,000 per year.The company should accept a special order for 1,000 units which would be sold for $13 per unit because the special order price exceeds variable costs.

Triton Industries reports the following information regarding its production cost: Units produced 77,000 units Direct labor \ 27 per unit Direct materials \ 12 per unit Variable overhead \ 2,541,000 in tota Fixed overhead \ 3,311,000 in total a.Compute production cost per unit under variable costing. b.Compute production cost per unit under absorption costing.

Given the following data, total product cost per unit under variable costing is $7.05. Direct labor \ 3.50 per unit Direct materials \ 1.25 per unit Overhead Total variable overhead \ 41,400 Total fixed overhead \ 150,000 Expected units to be produced 18,000 units

Given the following data, calculate the total product cost per unit under absorption costing. Direct labor \ 3.50 per unit Direct materials \ 1.25 per unit Overhead Total variable overhead \ 41,400 Total fixed overhead \ 150,000 Expected units to be produced 18,000 units

Under variable costing, the product unit cost consists of _______________________,direct materials, and variable overhead.

Star Services, Inc., a manufacturer of telescopes, began operations on October 1 of the current year. During this time, the company produced 50,000 units and sold 35,000 units at a sales price of $500 per unit. Cost information for this year is shown in the following table: Production costs Direct materials \ 85 per unit Direct labor \ 65 per unit Variable overhead \ 200,000 in total Fixed overhead \ 350,000 in total Nonproduction costs Variable selling and administrative \ 90,000 in total Fixed selling and administrative \ 500,000 in total -Given the Star Services Inc.data, what is net income using variable costing?

Which of the following best describes costs assigned to the product under the absorption costing method? Direct labor (DL) Direct materials (DM) Variable selling and administrative Variable manufacturing overhead Fixed selling and administrative Fixed manufacturing overhead

Information presented in a variable costing format can assist management when making short-term pricing decisions.

What is the general procedure for converting variable costing net income to absorption costing net income?

The variable costing income statement classifies costs based on cost behavior rather than function.

When evaluating a special order, management should:

Cloudy Company reports the following information for the current year: Units produced this year 51,000 units Units sold this year 53,000 units Direct materials \ 6 per unit Direct labor \ 3 per unit Variable overhead \ 255,000 in total Fixed overhead ? in total If the company's cost per unit of finished goods using absorption costing is $18, what is total fixed overhead?

Variable costing separates the variable costs from fixed costs and therefore makes it easier to identify and assign control over costs.

Star Services, Inc., a manufacturer of telescopes, began operations on October 1 of the current year. During this time, the company produced 50,000 units and sold 35,000 units at a sales price of $500 per unit. Cost information for this year is shown in the following table: Production costs Direct materials \ 85 per unit Direct labor \ 65 per unit Variable overhead \ 200,000 in total Fixed overhead \ 350,000 in total Nonproduction costs Variable selling and administrative \ 90,000 in total Fixed selling and administrative \ 500,000 in total -Given the Star Services, Inc.data, what is net income using absorption costing?

Contribution margin divided by sales equals contribution margin ratio.

Identify the treatment of each of the following costs under variable costing and absorption costing: Variable Costing Absorption Costing Product Cost Period Cost Product Cost Period Cost 1. Direct materials 2. Direct labor 3. Variable manufacturing overhead 4. Fixed manufacturing overhead 5. Variable selling 6. Fixed selling 7. Variable administrative 8. Fixed administrative

A company is currently operating at 65% capacity producing 12,000 units.Cost information relating to this current production is shown in the following table: Per Urit Sales price \ 6 Direct rraterial \ 2.30 Direct labor \ 0.87 Variable overhead \ 0.91 Fixed overhead \ 0.70 The company has been approached by a customer with a request for a special order for 2,000 units.What is the minimum per unit sales price that management would accept for this order if the company wishes to increase current profits?

_______________ and _______________ are product costs that can be directly traced to the product.

Which of the following best describes costs assigned to the product under the variable costing method? Direct labor (DL) Direct materials (DM) Variable selling and administrative Variable manufacturing overhead Fixed selling and administrative Fixed manufacturing overhead

Castaway Company reports the following first year production cost information: Units produced 53,000 units Units sold 51,000 units Direct labor \ 8 per unit Direct materials \ 4 per unit Variable overhead \ 2,173,000 in total Fixed overhead \ 3,339,000 in total a.Compute production cost per unit under variable costing. b.Compute production cost per unit under absorption costing. c.Determine the cost of ending inventory using variable costing. d.Determine the cost of ending inventory using absorption costing.